3 On 13 June 2000, the appellant (builder) and the first named respondents (owners) entered into a written ‘costs plus contract’ pursuant to which the builder was to construct a house for the owners with the work to be completed within 18 months. The contract contained an arbitration clause permitting either party to give notice of a dispute, and which provided that in the absence of settlement, the dispute could be referred to arbitration to be conducted in accordance with the Commercial Arbitration Act. The clause provided that if the parties could not agree on an arbitrator within five days of service of the notice, the President of the Housing Industry Association (HIA) or his nominee would appoint an arbitrator. The builder commenced work onsite.

4 On or about 21 October 2001, the owners wrote to the builder confirming an agreement reached on 17 October 2001, whereby the builder was to complete the construction of the house not on a costs plus basis but for a total of $429,000, including some specified extra items of work. The letter set out the total payments that had been made to that date and specified the total remaining payments to be made by the owners, and included a statement that the owners were ‘looking forward to the house being completed before 25 December’. The letter was signed by the builder signifying his agreement. The builder continued work, but apparently the house was still not completed on 16 November 2003. On that day a further meeting was held.

5 By letter dated 18 November 2003, the builder wrote to the owners purporting to confirm what had been agreed at a meeting on 16 November 2003. It read in part:
As you are aware, a written agreement has been entered into between you as owners and me as builder whereby I agreed to carry out certain building works at … Booragoon. This was superseded by another written agreement between us in October 2001, for a lump sum Price inclusive of those variations as stated.
6 In the letter the builder states that it was agreed that as from 16 November 2003 the builder would cease building works; that the owners would arrange for the various tradesmen concerned to complete the works; that the builder would reimburse the owners for the costs the owners incurred in having the building works completed; and that the builder would also pay rent until the owners had moved into the house up until February 2004 or until an earlier date. This letter was also signed by the owners under a statement confirming that it sets out the agreement reached between the parties on 16 November 2003.7 On 2 June 2004, the owners’ solicitors wrote to the builder giving notice of dispute with respect to the amounts payable by the builder to the owner, the owners’ claim for damages for defective work, and the rent payable by the builder.

8 On 20 July 2004, the owners’ solicitors wrote to the President of the HIA seeking the appointment of an arbitrator. After some delay, Mr Adrian Goold was appointed arbitrator.

9 The arbitrator convened a preliminary meeting on 5 July 2005. The meeting was attended by the owners and the builder, and by the legal representatives of the parties. The arbitrator prepared minutes of the meeting which recorded the following matters:

2. Arbitration agreement and nomination procedure was confirmed.

3. Nature of dispute:

…

8. Nominated Arbitrator then entered on reference.

9. [Orders were made setting a timetable for pleadings and discovery and that expert witnesses confer.]

…

12. Mr Amaral lodged $1,000 cheque with Arbitrator at preliminary meeting. Mr Alvaro advised that he would mail a cheque for $1,000.
1. Claimant and Respondent should be legally represented.
Claimant proprietors are claiming approximately $300,000 from Respondent builder. The amount is made up of the estimated cost of rectifying alleged defective workmanship and other amounts claimed as owing to the Proprietors. Respondent builder is not yet decided as to whether a counterclaim shall be pursued.
4. Arbitrator’s costs agreed at $170/hour plus GST.
10 The owners served points of claim on 27 October 2005. They referred to the costs plus contract and asserted that the builder commenced construction of the building works in or about October 2000. Paragraph 4 of the points of claim states:
On or about 21 October 2001, the owners and the builder agreed in writing to vary or substitute the costs plus contract to provide for a lump sum payment for building works on the property …
11 The material facts supporting the claims for damages and other monies were then set out.12 In January 2007, the parties served lists of discoverable documents even though the builder had still not served a defence. By August 2007, the builder had served points of defence and counterclaim. The defence denied par 4 of the owners’ points of claim and asserted that ‘on or about 21 October 2001 the Owners and the Builder agreed in writing to vary the Costs Plus Contract as set forth in a written document dated 21 October 2001′. A hearing of the arbitration was proposed for 5 – 9 May 2008, but it was cancelled.

13 On 17 June 2008, the solicitors for the builder advised that they no longer acted for the builder, and new solicitors were appointed. On 1 October 2008, those solicitors wrote to the arbitrator seeking his removal on the basis of possible apprehension of bias. On 23 October 2008, Mr Goold stepped down as arbitrator. A new arbitrator was then appointed by the HIA. The builder objected to that arbitrator on the grounds of an alleged association with one of the owners’ witnesses. That arbitrator did not enter on the reference.

14 In February 2010, the then solicitors for the builder advised that they no longer acted for him. A third set of solicitors commenced acting for the builder in October 2010. A few months later, in January 2011, they in turn advised that they no longer acted for the builder.

15 Attempts were made to agree to the appointment of a new arbitrator without success. In May 2011, the solicitors for the owners advised that if agreement about the appointment of a new arbitrator could not be reached, then an application would be made to the court to fill the vacancy. On 8 February 2012, the present arbitrator (Mr Scott Ellis, the second respondent) was nominated as arbitrator.The partial award

16 On 20 February 2012, for the first time, the builder raised an issue with respect to the jurisdiction of the arbitrator. This led to a hearing on 24 April 2012. At the hearing, the builder contended that:

(b) the costs plus contract containing the arbitration clause was replaced by another agreement which did not contain an arbitration agreement; and

(c) as a consequence, he was not obliged to participate further in the arbitration proceedings and would not be bound by the outcome.
(a) disputes between the parties had been resolved by various agreements;
17 On 2 May 2012, the arbitrator published a partial award. In the award, the arbitrator identified three issues to be addressed; first, whether the owners’ claims had been settled by agreement between the parties; second, whether the arbitration clause formed part of the contractual relationship between the parties; and third, whether the builder was prevented from objecting to the arbitration.18 The arbitrator ruled that the first issue would be determined later in the proceedings. He concluded that at the time of the hearing, it was not clear beyond argument that the owners’ claims had not been settled. He accepted the owners’ contention that the question of whether settlement had occurred went to the substance of the dispute and the merits of the owners’ claim, rather than to the question of jurisdiction, and ruled that he would determine the issue later in the proceedings.

19 In relation to the third issue, the arbitrator held that the builder was estopped from denying the existence of the arbitrator’s jurisdiction. The arbitrator pointed out that the builder had, in the past, failed to object to the dispute being resolved by arbitration. The arbitrator also observed that the builder had participated in the proceedings and had raised a counterclaim. The arbitrator held that the builder’s participation in the arbitration proceedings was ‘a representation or induced an assumption that the dispute would be resolved by arbitration’ and that the owners participated in the arbitration on that basis. He observed that if the question of jurisdiction had been raised at, or soon after, the preliminary conference on 5 July 2005, the owners could have had the issue determined at the time or commenced proceedings in the District Court, or both.

20 The arbitrator noted that the owners did not take that course because no objection to jurisdiction was raised by the builder. The arbitrator noted that the limitation period for commencing proceedings in court had expired, and that if the builder was permitted to resile from the position he had previously taken, the owners would suffer significant prejudice

22 Accordingly, in relation to the second issue, the arbitrator held that it was not necessary to decide whether there was an arbitration clause in the agreement between the parties because it was too late for the builder to contend that the arbitrator had no jurisdiction.

23 The arbitrator therefore found and declared that he had jurisdiction to resolve the dispute, and that the builder’s objections to his jurisdiction and to participating in the arbitration proceedings must fail.The application for leave to appeal from the arbitrator’s award

24 Section 38 of the Commercial Arbitration Act provides:

(1) Without prejudice to the right of appeal conferred by subsection (2), the Court shall not have jurisdiction to set aside or remit an award on the ground of error of fact or law, on the face of the award.

(2) Subject to subsection (4), an appeal shall lie to the Supreme Court on any question of law arising out of an award.

(3) On the determination of an appeal under subsection (2), the Supreme Court may by order –
38. Judicial review of awards

(b) remit the award, together with the Supreme Court’s opinion on the question of law which was the subject of the appeal, to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration,

and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make the award within 3 months after the date of the order.

(a) confirm, vary or set aside the award; or
(4) An appeal under subsection (2) may be brought by any of the parties to an arbitration agreement –

(b) subject to section 40, with the leave of the Supreme Court.

(a) with the consent of all the other parties to the arbitration agreement; or
(5) The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that –
(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement; and

(ii) strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law.

3. The scheme of the Act is to hold parties to their agreement to accept factual findings made by arbitrators (Westport Insurance[27]).

4. In the absence of the consent of all parties to the arbitration agreement, an appeal can only be brought with the leave of the court (Act, s 38(4)).

5. Leave cannot be granted unless the court considers that the determination of the question of law concerned could substantially affect the rights of at least one of the parties to the arbitration agreement, and either:

7. The requirement that the error be manifest on the face of the award does not import a requirement that the error of law have a particular quality or character, so as to include only facile errors, and exclude complex errors (Westport Insurance[45] (French CJ, Gummow, Crennan and Bell JJ), [163] (Kiefel J)).

8. Even if the statutory requirements for the grant of leave are satisfied, the court retains a residual discretion to refuse leave (Westport Insurance[38] (French CJ, Gummow, Crennan and Bell JJ), [165] (Kiefel J)). That discretion will be exercised having regard to ‘the rival merits of assured finality on the one hand and upon the other the resolution of doubts as to the accuracy of the legal reasoning followed by the arbitrator’ (Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724, 739 (Lord Diplock), cited with approval in Westport Insurance[38]). Other matters to be taken into account when deciding whether leave should be granted (assuming the statutory requirements are satisfied) include the character or quality of the error of law (Westport Insurance[47]), whether the rights of the parties will be substantially affected by the determination of the question of law (Westport Insurance[165]), and all the circumstances of the case (Westport Insurance[29], [165]; Qantas Airways Ltd v Joseland and Gilling (1986) 6 NSWLR 327,333 (McHugh JA)).
1. An appeal lies on a question of law ‘arising out of an award’ (Act, s 38(2)).

(b) there is strong evidence that the arbitrator made an error of law and that the determination of the question may add, or may be likely to add substantially to the certainty of commercial law (Act, s 38(5)).

(a) there is a manifest error of law on the face of the award; or
6. The requirement that the error of law be manifest on the face of the award means that it must be apparent to that understanding by a reader of the award (Westport Insurance [42] (French CJ, Gummow, Crennan and Bell JJ), [163] (Kiefel J)).
26 On 29 June 2012, the builder filed an originating motion pursuant to s 38 of the Commercial Arbitration Act seeking leave to appeal against the arbitrator’s partial award, alleging that the arbitrator erred in law in finding that he had jurisdiction to conduct the arbitration.27 The application for leave was heard by Master Sanderson on 24 October 2012. The master correctly identified the question of law the subject of the application for leave as being whether the arbitrator had jurisdiction to conduct the arbitration. The master summarised the builder’s argument as being that the original cost plus contract between the parties had been replaced by a contract which did not contain an arbitration clause, with the result that the arbitrator did not have jurisdiction to determine the dispute.

28 The master noted that the arbitrator had dealt with the issue on the basis of estoppel, and referred to the arbitrator’s reasons in which he observed that the builder had participated in the arbitration and had served documents which indicated his acceptance of the existence of an arbitration agreement.

29 The master stated that he was satisfied that the arbitrator’s decision was ‘right’ and that he had not made an error of law, and in any event any error could not be said to be manifest on the face of the award. He noted that given that there was a preliminary meeting with the arbitrator and the parties on 5 July 2005, there was a strong argument to be made that there was an agreement to arbitrate as at 5 July 2005. He observed that there was no movement between the parties which would vitiate that agreement, with the result that the arbitration was properly on foot. The master concluded that the builder had proceeded on the basis that an arbitration was on foot and acted accordingly, and as the owners had acted in reliance on the builder’s conduct, an estoppel arises preventing the builder from denying the existence of an arbitration agreement.

30 The master also observed that this was not a case where the decision could add to the certainty of commercial law.

31 The master concluded that there was no manifest error of law on the face of the award and otherwise no error of law.The current appeal

32 The builder appealed against the master’s decision on the following grounds:

(b) the master erred in law by failing to give adequate reasons; and

(c) the master erred by failing to have regard to matters drawn to the attention of the arbitrator, ‘namely the various agreements between the parties ending the dispute’.
(a) the master erred as a matter of law in exercising his discretion to refuse to grant leave to appeal;
33 The builder did not challenge the master’s ruling that the arbitrator did not make an error of law in concluding that the builder was estopped from denying that the arbitrator had jurisdiction. That ruling was necessarily fatal to the application for leave to appeal. When this fundamental deficiency was brought to the attention of counsel for the builder during the argument on the appeal to this court, he made no attempt to demonstrate any error in the arbitrator’s conclusion that the builder was estopped from now denying that the arbitrator had jurisdiction. This was fatal to the appeal.

The master did not err in exercising his discretion to refuse to grant leave to appeal

34 A decision with respect to the grant of leave under s 38(4)(b) and (5) of the Commercial Arbitration Actclearly involves an exercise of discretion – see Westport Insurance Corporation v Gordian Runoff Ltd[2011] HCA 37; (2011) 244 CLR 239 [165] (Kiefel J). An appellate court is not entitled to substitute its own view for that of the primary judge merely because the appellate court would have exercised the discretion differently – House v The King [1936] HCA 40 ; (1936) 55 CLR 499, 504–505.

35 This was a case in which there was clearly no error in the master’s exercise of discretion. By reason of s 38(5) of the Commercial Arbitration Act, the master was obliged to refuse to grant leave once he decided that there was no manifest error of law on the face of the award, and no evidence (let alone strong evidence) that the arbitrator made an error of law. In the absence of a challenge to the master’s finding that there was no error of law on the part of the arbitrator, the ground of appeal alleging that he erred in exercising his discretion to refuse to grant leave to appeal had to be dismissed.The master did not err by failing to give adequate reasons

36 The builder alleged that the master also erred by failing to give adequate reasons. It was asserted that the master’s reasons do not adequately explain the way in which the builder’s argument was put or his reasoning. In Nyoni v Patterson [2011] WASCA 215, Newnes and Murphy JJA observed:
The purpose of reasons is to disclose the basis for the decision, as otherwise the losing party cannot know whether there has been a mistake of law or of fact: Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 [27] – [28]. But reasons need not be lengthy and elaborate. What is necessary in any particular case will depend upon the nature of the case: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, 443. Moreover, as the Full Court pointed out in Mount Lawley, inadequacy of reasons does not necessarily amount to an appealable error. An appeal court will only intervene when no reasons have been given in circumstances in which they were required, or when the inadequacy is such as to give rise to a miscarriage of justice [29] [24].
37 The master’s reasons summarised the builder’s contentions, and the question which he was required to decide; namely whether the arbitrator fell into error in determining that he had jurisdiction to hear the matter. He stated that the arbitrator’s finding that he had jurisdiction was ‘right’; either because there was an estoppel, as was found by the arbitrator, or due to the existence of an agreement to arbitrate as at 5 July 2005. By stating that the arbitrator was ‘right’, the master was, in effect, adopting the arbitrator’s reasons as his own, supplemented by his own observations, to conclude that there was no manifest error of law on the face of the award and no evidence of an error of law.38 In the circumstances, on such a short point it was entirely appropriate for the master to adopt the reasons of the arbitrator, enhanced by his own observations. Whilst the master’s reasons were succinct, they adequately set out the reasons for his conclusion that the arbitrator did not fall into error in determining he had jurisdiction, and consequently why he did not consider that leave should be granted under s 38 of the Commercial Arbitration Act.The master did not err by failing to have regard to an alleged compromise between the parties ending the dispute

39 Counsel for the builder contended that the master erred by failing to have regard to an alleged compromise between the parties ending the dispute. There was no error. The arbitrator ruled that issue would be decided in the course of the arbitration as it went to the merits of the owners’ claims, and could be affected by the evidence led. There is no error evident in that conclusion which was plainly open. The question which had to be determined by the arbitrator, and which was determined, was whether the arbitrator had jurisdiction to determine the dispute. The master held that the arbitrator was correct in adopting this approach.

40 No cogent argument was advanced to the effect that the master erred in this conclusion.

41 For those reasons, the appeal was dismissed and the appellant was ordered to pay the respondents’ costs.